Happy birthday CD – the format that killed the music industry

The BBC runs a piece today about the 25th anniversary of the CD, saying "it remains the dominant format in spite of the growth in digital downloads."

How much longer it remains dominant is a moot point. Robert Sandall has written a very good article in the latest issue of Prospect magazine about the economics of the music industry – and it is plain to see why the business is in such a blue funk.

For example: "Although Britons still buy more CDs per head than anyone else—2.7 in
2006—the market for recorded music is in rapid decline. In the first
quarter of 2007, the market for the top-selling 200 CDs in Britain
shrank by 20 per cent compared to the same period in 2006. In the US,
CD sales in 2007 are down by 15 per cent, in France 25 per cent, in
Canada 35 per cent. The German market, once the largest in Europe, is
now no bigger than that of the Netherlands."

Sandall argues persuasively  that the CD actually contained the seeds of its own downfall – and that some in the industry were well aware of this when it was first introduced.

"One of the few industry moguls to raise his voice against the digital
format in its early days was the late Maurice Oberstein, an American
who was latterly head of the Polygram UK (later Universal) label. "Do
you realise we are giving away our master tapes here?" he asked at an
industry event. At the time, everybody was too busy counting the cash
to listen. But as the advent of recordable CDs kickstarted a black
economy in counterfeits in the 1990s, Oberstein was proved right."

In short, the numbers just don’t add up for the recording industry.

"Far better to download songs; at the iTunes music store, tracks retail
for 99 cents in America and 79p here. In Britain, at the end of the
1990s, CD singles sold for £4. Of that, the artist received about 50p,
while the record company took as much as £1. Under the new web-style
arrangement, the artist is lucky to get 10p, and the company might
gross 30p.

This destruction of the value of individual recordings explains why,
even if we were to carry on buying recorded music in the quantity we
did at the end of the last century, the prospects for suppliers would
still be bleak. However high the record companies worldwide pile their
audio products in future, the only way they will be able to sell them
is cheap. In Britain, the 10 per cent of singles still sold on CD now
retail for just £1.49.

Record company insiders are aghast at the demise of what was, for the
last two decades of the 20th century, their golden goose. And some of
them know that they were partly responsible for killing it."

The unexpected punchline in Sandall’s piece is that live music is seeing a resurgence:

"A rediscovery, or a renewed appreciation, of the communal source of
music-making—and listening— must lie near the root of this upending of
the music business. As personal stereos and MP3 players have grown in
popularity, so has an appreciation that music isn’t just something that
goes on between your ears. The guitarist of the American hardcore band
Anthrax expressed this rather neatly: "Our album is the menu," he
explained. "The concert is the meal."

In his book e-Topia, William Mitchell relates the increasing value of
shared experience to the isolating nature of electronic or online
virtual worlds. "In conducting our daily transactions, we will find
ourselves constantly considering the benefits of the different grades
of presence that are now available to us, and weighing these against
the costs," he writes. Being in the same place at the same time as a
live performance, music fans appear to have decided, is the rarest and
most precious presence of all."

So – happy 25th birthday, CD. However, perhaps you won’t be getting as many music biz execs attending the party as you might once have.